OnLive layoffs leave the future of cloud gaming uncertain

Cloud gaming service, OnLive, recently announced it had been purchased by a separate firm and laid off half its staff, leaving its future in question

OnLive has gained some steam in the past couple years with its impressive cloud gaming service, which allows modern games to stream instantly to almost any device. In just the past two months alone, the company has announced deals to bring the service to both LG Smart TVs and the Android-based OUYA gaming console. So it was shocking to say the least for OnLive employees to learn this past weekend that all of them were being laid off and the company had been purchased by another firm in a bid to avoid bankruptcy. As one of only two major players in the cloud gaming business and the owner of a number of patents on the technology, the news raises quite a bit of uncertainty for the future of cloud-based gaming.

For an undisclosed amount, OnLive was recently bought by venture capital firm Lauder Partners as part of an "Assignment for the Benefit of Creditors" (or "ABC"), a process that allows companies to transfer all assets to another to avoid filing for bankruptcy. The company's assets were then transferred to a newly formed company that will also operate under the OnLive name.

Reports from laid off staffers have been bleak so far and statements from OnLive, while positive in tone, only confirm most of the unnerving details. Of the almost 200 employees who lost their jobs, only about half of them will receive employment offers at the newly formed company, and all shares and stock options belonging to employees and investors alike have now been rendered worthless. OnLive stated that any laid off employees would have the opportunity to do consulting in exchange for stock options in the new company, but the possible value of any options has yet to be seen.

The only silver lining in the whole fiasco is that OnLive's 2.5 million subscribers will not see any interruption in services - part of the reason the company opted for an ABC over bankruptcy in the first place. For the most part, users won't notice any difference as all apps, devices, and purchases will remain available and functional.

Underlying the drama surrounding layoffs and corporate acquisitions, though, is the question of where all this leaves cloud-based gaming. OnLive has been at the forefront of the cloud gaming industry since it launched in 2010, bringing an impressive service that streams even the most graphically-intense games to almost any screen, much as Netflix does movies. The only other major player with similar technology is Gaikai, which was recently acquired by Sony, so a blow to OnLive signals a blow to cloud gaming technology as a whole. It doesn't help that OnLive and its CEO, Stephen Perlman, also hold some fundamental patents on the technology that could interfere with any separate companies from taking up the reins.

It's practically a sure bet that an instant-access gaming service like OnLive's is the future of video game distribution, but just how much OnLive's troubles slow the industry from getting there remains to be seen.

Jonathan grew up in Norway, China, and Trinidad before graduating film school and becoming an online writer covering green technology, history and design, as well as contributing to video game news sites like Filefront and 1Up. He currently resides in Texas, where his passions include video games, comics, and boring people who don't want to talk about either of those things. All articles by Jonathan FincherFollow @jonathanfincher